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How Does Social Trust Affect Economic Growth?

Aarhus University - Department of Economics and Business; Research Institute of Industrial Economics (IFN); Center for Political Studies

April 2, 2009

Aarhus Economics Working Paper No. 06-2

Abstract:

This paper connects two strands of the literature on social trust by estimating the effects of trust on growth through a set of potential transmission mechanisms directly. It does so by modelling the process using a three-stage least squares estimator on a sample of countries for which a full data set is available. The results indicate that trust affects schooling and the rule of law directly and thereby raises economic growth rates. The paper closes with a short discussion of the relevance of the findings.